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Liontrust Dealer's Roar - 30/09/2011

“Failure is the condiment that gives success its flavour” – Truman Capote, American author and writer of Breakfast at Tiffany’s, born September 30th 1924, died August 25th 1984.

The end of the third quarter has finally arrived and I suspect that most will not remember it with any great pleasure, with all major markets having fallen by more than 10%.  The major overnight event was the release of China’s HSBC manufacturing data which was unchanged in September, but worryingly it showed the third consecutive sub 50 reading consecutively, which has not happened since 2009. Amazingly, the percentage of total market turnover made up by short selling overnight in Hong Kong was 14%, the highest number in twelve years. Markets seem to be starting to really worry about a slowdown in China, at a time when it feels as if most of the Western world needs a robust Chinese economy.  

Liontrust Dealer's Roar - 29/09/2011

“I must tell you that the supply of words on the world market is plentiful, but the demand is falling” – Lech Walesa, Polish politician, trade-union organiser and human rights activist, President of Poland between 1990 – 1995 and winner of the Noble Peace Prize in 1983. Born 29th September 1943.

I think Lech just about sums up my thoughts on the current market, lots of words but demand for hearing another headline regarding the Eurozone has just about hit rock bottom. Either it gets sorted out or not but please do something soon leaders of the world so we can start talking about something else, like whether the Chinese monopoly over rate earth elements is a peril or an opportunity. Headlines like Prodi Says Governments Must Solve Euro Problems, Not ECB are getting increasingly dull!

Liontrust Dealer's Roar - 28/09/2011

“Only idiots refuse to change their minds.” – Brigitte Bardot, French model, born September 28th 1934.

The focus of the financial world continues to be on Greece. Speculation on where we go and how we get there continues unabated. The leader in the FT this morning highlights ongoing strains and disagreements, with Germany and the Netherlands are leading the calls for more PSI losses whereas France and the ECB are fiercely resisting any such move.

Liontrust Dealer's Roar - 27/09/2011

“It does not take a majority to prevail... but rather an irate, tireless minority, keen on setting brushfires of freedom in the minds of men”– Samuel Adams, American revolutionary, born September 27th 1722, died October 2, 1803.

US markets were already in good shape and after initially trading sideways they staged a decent end of day rally, with the S&P moving a further 1.68% up from UK 16:30 to close up 2.33% on the day. The main driver of the increased positive sentiment was a story appearing on CNBC which suggested Europe may be closer to a solution for its embattled sovereigns and banking sector. They reported that officials are planning for the European Investment Bank (EIB) to use a special purpose vehicle (SPV) to issue bonds that would help finance the purchase of debt (other bonds) and to shore up bank capital. To put it simply, banks loaded down with distressed sovereign bonds could sell them to an SPV and in return buy debt issued by the SPV which will have a higher credit rating (one assumes). They then use this new debt as collateral to get cash from the ECB. It’s a similar scheme to the US Trouble Asset Relief Scheme (TARP) only the ‘toxic’ securities are not mortgage backed but sovereign backed. 

Liontrust Dealer's Roar - 24/09/2011

“I knew I'd conquered America when Mike Tyson told me I was one mean lady.” – Anne Robinson, acerbic presenter of The Weakest Link, born September 26th 1944.

All sorts of fun and games at the weekend! Numbers longer than an international telephone number being bandied around in the press as speculation mounts of possible solutions. As one commentator put it, very accurately in my view, things look as if they are getting so bad in Europe that the chances of seeing something altogether more substantial than the endless stream of rhetoric have assuredly increased. But that is what it is going to take: looking over the edge into the abyss probably will not be enough to force the hands of central bankers and politicians. They will actually need to have slipped, felt their heart jump and, as last resort, thrown their hands out in a desperate final effort to cling onto something, anything that prevents the very long descent into economic oblivion.

Liontrust Dealer's Roar - 23/09/2011

“I never wanted to be famous. I only wanted to be great.” Ray Charles, American musician, September 23rd 1930 – June 10th 2004

Wall Street ended a pretty shabby day down by just over 3%, making the biggest two day fall for almost three years. After the latest G20 meeting finished in Washington we, once again, had lots of well intended words in the statement, but nothing concrete. The G20 officials pledged to support growth and agreed to bring strong global response to the table. Officials also vowed to have the expanded EFSF in place before the next G20 meeting (14-15th October). Commitments were made to take 'all necessary actions' to stabilise the financial sector. The G20 central banks also stand ready to provide liquidity to banks as required. On banks' capital, the G20 officials will ensure that banks are adequately capitalised but interestingly also added that no further stress test is required in Europe. 

Liontrust Dealer's Roar - 22/09/2011

“The five essential entrepreneurial skills for success are concentration, discrimination, organization, innovation and communication.” Michael Faraday, English chemist and physicist, September 22nd 1791 – August 25th 1867.

So Operation Twist appeared on cue and, to be fair to the Fed, it was rather more comprehensive than markets had been expected. But it was not enough to prevent a rout in markets. Wall Street fell sharply after the FOMC announcement, which highlighted “significant downside risks” in the US Economy and that, coupled with Moody’s downgrades on three banks (Bank of America, Wells Fargo and Citigroup), became the key drivers. And whilst Operation Twist went further than expected the reality, as Barton Biggs said:

“The markets apparently were hoping for a large, magic pill for an anaemic economy that feels like it’s catching the flu.”

Liontrust Dealer's Roar - 21/09/2011

“I think JR would make a better President than the one we have now” – Larry Hagman, American actor, born September 21st 1931.

US markets initially traded sideways post our departure then sold off into the bell to finish near intraday lows, with the S&P shedding 1.35% from 16:30 UK time. Reasons for the risk reversal were sighted as the delayin the decision over whether Greece will receive the next €8bn tranche of the loan it needs (thought this was already known I think) and talk that Brazil had set a high-bar forsupport of the Eurozone with their finance minister Guido Mantega suggesting, “Europe has to save itself”. I’m not sure I buy either of these, I think the market is firmly in wait and see mode ahead of the FOMC meeting (19:15 our time today)

Liontrust Dealer's Roar - 20/09/2011

“Times of uncertainty may be a harder test for a leader, but they are also a tremendous opportunity for those who make the right choices” – Bruce Pasternack, former President and CEO of the Special Olympics, born September 20th 1947.

US markets recovered from their lows post our departure with the S&P adding 0.87% to close down c1% in a late rally. Sentiment remained subdued thanks to lack of action over the weekend from the Eurozone finance ministers and the decision todelay the next tranche of the Greek bailout till October (prompting worries they would default). Obama clambered back behind a podium to announce a £2.29 trillion plan to cut US budget deficits partly by raising taxes on the rich (pretty popular strategy around the world at the moment!) but as per his plans last week it doesn’t sound feasible,with the Republican party calling it a political stunt.

Liontrust Dealer's Roar - 19/09/2011

“I got a pair of red, synthetic satin women's pants through the post the other day with a phone number on. That was quite strange. I haven't tried the phone number. In times of stress I may.” Jarvis Cocker, lead singer of Pulp, born September 19th 1963

After a week of rose-tinted spectacles, markets returned to a rather more pragmatic mood, with the focus fairly and squarely back on Greece. I was interested to read that Jim Reid of Deutsche Bank was in the US last week and found every client asking what Germany’s attitude to Europe “actually” is. They needn’t have bothered, because the answer was in a poll printed in Frankfurt Allgemeine last week.

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